Certified College of Accountancy’s Mock Exam

PAPER: Financial Accounting (FA)

Full Marks 25×2=50

Pass Marks 26

Time allowed: 1 Hour

STUDENTS NAME:……………………………..
DATE:…………………………………………………

Marks obtained:………………………………………………
Teachers Remarks:
:…………………………………………………………………………………………………
…………………………………………………………………………………………………
 ALL 25 questions are compulsory and MUST be attempted

1. A business has the following balances relating to motor vehicles:

Particular Year ended 31 December 20X6 ($) Year ended 31 December 20X7 ($)
Carrying amount 40,000 15,000
During the year to 31 December 20X7:
A) Depreciation charge for the year amounted to $15,000
B) There had been no additions to motor vehicles
C) One of the motor vehicles had been disposed of for sales proceeds of $2,000
Using the above information, what should be the loss on the sale of the motor vehicle sold
during the year?
Answer :………………..

2. A building was purchased on 1 January 20X1 for $300,000 and had a useful life of 40 years. On
1 January 20X5 the building was revalued by a professional surveyor to $450,000 and had a
remaining useful life of 50 years. Directors decided to incorporate the revalued amount into
the financial statements. What is the depreciation charge for the year ended 31 December
20X5?
a) $11,250
b) $6,000
c) $9,000
d) $7,500
Answer :………………..
3. On 1 January 20X6 a business purchased a motor vehicle. The vehicle cost $10,000 and has a
residual value of $2,000. Depreciation is calculated at 20% using the reducing balance method.
Which of the following should appear in the trial balance as at 31 December 20X7?
a) Accumulated depreciation Dr. $3,600
b) Motor vehicle Dr. $8,000
c) Accumulated depreciation Cr. $3,600
d) Depreciation expense Dr. $2,000
Answer :………………..

4. ABC Co. purchased a building for $500,000 on 1 January 20X2 (of which land cost $200,000)
with an expected useful life of 50 years. Depreciation is charged on a straight-line basis. On 1-
Jan- 20X5 the building was revalued to $800,000 (including land of $350,000). How much
should be recorded in revaluation reserve at 1-Jan-20X5 in respect of the land and buildings?
a) $150,000
b) $168,000
c) $318,000
d) $300,000

Answer :………………..
5. BF Co has 120 units in inventory at 31 March 20X8. Each unit had cost $450 when they were
purchased. The normal sales price of each unit is $500. During March 20X8, 20 of the units
were damaged and will require repair costs of $12.50. The selling price after repairs have been
carried out will be $430 per unit. What is the closing inventory figure at 31 March 20X8?
a) $54,000
b) $53,600
c) $53,350
d) $50,100
Answer :………………..

6. Which of the following would give a mark-up on cost of 40%?

a) Sales are $201,600 and gross profit is $80,640
b) Sales are $201,600 and cost of sales is $144,000
c) Sales are $240,000 and gross profit is $96,000
d) Sales are $240,000 and cost of sales is $144,000
Answer :………………..

7. On 1 January 20X8 new premises were acquired at a cost of $750,000. As on 1 January 20X8
additional associated costs incurred were as follows:
Particular $
Legal costs of purchase 7,500
Architect’s fees 9,200
Annual maintenance contract 6,000
Alterations to property 25,000
The premises is to be depreciated over its useful life 20 years. The company prepares financial
statements at 31 December each year. What is the carrying amount of the premises in the
statement of financial position as at 31 December 20X8?
Answer :………………..

8. Which of the following statements is correct?

a) Non-current assets should always be revalued annually so that values in the statements of
financial position are kept up-to-date
b) Self-constructed assets should be depreciated from the date construction starts
c) At the end of each accounting period the residual value and useful life of a non-current
asset should be reviewed
d) The useful life of a tangible non-current asset cannot be more than 20 years
Answer :……………….

9. A business has a financial year end 30 June 20X7 but undertook its annual inventory count on
5 July 20X7 and valued inventory at a cost of $75,000. During the period from 1 July 20X7 to 5
July 20X7 the following transactions took place:
 Particular $
Sales ( at selling price) 30,000
Purchases at cost 23,000
The business has a 25% mark-up on cost. What is the cost of inventory held on 30 June 20X7?
a. $82,000
b. $74,000
c. $76,000
d. $74,500
Answer :………………..

10. A company bought a machine on 1 November 20X2:

Purchase price $22,000
Expected useful life 7 years
Estimated residual value 1,000
On 1 May 20X6 the machine was disposed of for $9,000. The company charges depreciation of
machinery on a straight-line basis with a proportional charge in the years of acquisition and
disposal. The business has a year end of 31 December. What would be the profit or loss on
disposal of the machine?
a. Profit of $1,000
b. Loss of $1,000
c. Profit of $2,500
d. Loss of $2,500
Answer :………………..

11. In accordance with IAS 2 Inventories, what is the definition of net realizable value?
a. Purchase cost plus costs of conversion and selling costs
b. Purchase cost plus costs of conversion and storage costs
c. Selling price less costs to completion and selling cost
d. selling price plus costs to completion and selling costs
Answer :………………..

12. Deval purchases all goods on credit and is currently preparing its financial statements for the
year ended 31 December 20X6. From the records that have been kept, the following
information is available:
a. Trade payables at the start of the year were $97,800
b. Trade payables at the end of the year were $109,900
c. Cash paid to credit suppliers was $86,300 for the year
d. Settlement discounts received from credit suppliers were $2,600

Deval’s inventory records also show that inventory at the start of the year amounted to $46,800
and at the end of the year was $34,400. What was the cost of goods sold for the year?
Answer :………………..
13. Fawad purchased machinery costing $30,000 on 1 July 20X2 which had a useful life of ten
years and was depreciated on a straight-line basis. On 1 July 20X5 Fawad reassessed the
original useful life to 15 years. What is the depreciation charge for the machinery in the year
ended 30 June 20X6?
a. $2,000
b. $1,750
c. $1,400
d. $2,500
Answer :………………..
14. ABC incorrectly recorded the purchase of a non-current asset costing $40,000 as a repair
expense. The asset should have been depreciated at 25% straight-line basis with a full year’s
charge in the year of acquisition. Are the following statements relating to the impact of the
error true or false?
Particular True False
The net assets figure in the statement of financial position will be
understated by $30,000
The profit for the year in the statement of profit or loss and other
comprehensive income will be overstated by $30,000

15. ABC Co had non-current assets with a cost of $2,260,000 at the start of 20X8. During the year
the following transactions took place:
a. Non-current assets with a cost of $545,000 were purchased
b. Assets costing $290,000 were sold for $130,000
c. A building which had cost $700,000 and had a carrying amount of $350,000 was revalued to
$900,000
What is the balance on the non-current assets cost or revaluation account at 31-Dec-20X8?
a. $3,065,000
b. $2,715,000
c. $2,875,000
d. $3,225,000
Answer :………………..

16. Which TWO of the following does IAS 2 Inventories allow to be included in the value of
inventory?
a. Product advertising costs
b. Finance manager’s salary
c. Depreciation of factory
d. Production manager’s salary
Answer :………………..

17. One item of inventory cost $3,000 to purchase. It will cost $300 to get the item ready for sale
and $200 auctioneer’s fees to sell the item. He plans to sell it for $3,400. It would cost $3,700
to buy a similar item of inventory.
 In his draft financial statements he has valued the inventory at $2,900. Which inventory
valuation method has he used?
a. Net realisable value
b. Replacement cost
c. Historical cost
d. Expected selling price
Answer :………………..

18. Fiana has the following inventory at cost.

a. Cups $300
b. Glasses $500
c. Crockery $825
The following information has been discovered:
a) The cups have been damaged and have a net realisable value of $250.
b) The glasses have a selling price of $600
c) The crockery has slight damage but if it is repaired at a total costs of $75, it can be
sold for $700
What should be the value included for total inventory in Fiana’s statement of financial
position?
Answer :………………..

19. Busy Co. has decided to change its method of inventory valuation from FIFO to
average cost. At 31st December 20x7, the inventory valuation using average cost is
much lower than its FIFO valuation. When considering the effect of the inventory
valuation, which of the accounting concept should the users of Busy Co’s financial
statements consider?
a) Accruals concept
b) Going concern
c) Substance over form
d) Consistency

20. Silver co. made sales of $193,200 during the year ended 31 august 20x1. Inventory
decreased by $13,200 over the year and all sales were made at a mark-up of 42%.
What was the cost of purchases during the year, to the nearest $1,000?
a) $109,000 b) 136,000 c) $123,000 d) $149,000
Answer :………………..

21. Ben acquired a vehicle on 1 February 20x4, costing $15,000. Ben depreciates the
vehicle at 20% per annum, using the reducing balance method. His depreciation policy
is to charge for a full year’s depreciation in the year of acquisition and none in the
year of disposal. He disposed of the vehicle on 1 August 20x6 for $10,200. What
should the profit on disposal recognized in the financial year ended 31-Dec-20X6 be?
 Answer :………………..

22. The following transactions have been recognized in the financial statements of
Monument Co. for the year. Loss of $50,000 on the revaluation of a property that had
previously been revalued upwards by $80,000. Gain of $20,000 on disposal of
equipment that was accounted for using the cost model. Where should these items be
recognized in the financial statements?
Particular Statement of profit or loss Statement of other
comprehensive income
Equipment -gain on
disposal
Property-revaluation loss

23. Which of the following are ADVANTAGES to the owner of an entity operating as an
unincorporated business as opposed to an incorporated business?

1) Legal separation of the entity from the owners

2) Unlimited liability

a) 1 only
b) Neither 1 nor 2
c) 2 only
d) 1 and 2
Answer :………………..

24. On June 6 20x6, a fire in a company’s offices destroyed various accounting records.
The accounting staffs were able to piece together the following information from the
undamaged records.
a) Inventories held at 31 December 20X5 were $58,100
b) Purchases from 31 December 20x5 until the date of fire were $93,400
c) Inventories held at the date of the fire were $48,600
d) All sales were made at a uniform gross profit margin of 25%
What was the sales revenue for the period from 31 December 20X5 until 6 June 20X6?
Answer :………………..
25. Nicholas has purchased computer equipment for use in his business. The total cost is
made up as follows:
Particular $
Basic costs 1,000
First year insurance 300
Computer monitor 400
Printer 200
Delivery charge 100
Annual maintenance 200
At what cost should the computer equipment be shown in Nicholas’s statement of financial
position?
Answer :………………..